Scenario Analysis Based on TCFD Recommendations
Fuji Pharma Co., Ltd.
| Publication date | May 22, 2023 (Posted on January 11, 2024) |
|---|---|
| Sector | Industrial and Economic Activities |
Company Overview
Since its establishment in 1965, Fuji Pharma has been developing its business to contribute to society through the development, manufacture, and sale of pharmaceuticals that help people overcome pain and challenges, based on the management principles of "we help people lead healthy lives by offering excellent pharmaceuticals" and "our corporate growth is proportional to our personal growth". As a specialty pharmaceutical company in the field of women's health care, we aim to become the leading company in the field by providing a large selection of new drugs and generic drugs for infertility, pregnancy and childbirth, contraception, dysmenorrhea, endometriosis, menopausal disorders, and other health issues specific to women.
Climate Change Impacts
The worsening and increasing number of extreme weather events due to climate change could have effects such as damage to business sites and factories, deterioration of the working environment, and reduced employee productivity. There is also the possibility of water shortages due to salinization of well water and reduced snowfall as a result of rising sea levels, which could make it difficult to procure raw materials.
Adaptation Initiatives
In December 2022, we expressed our support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Based on the TCFD recommendations, we conducted a scenario analysis (Fig. 1) to identify climate change-related risks and opportunities that could affect our business by 2030. We assessed the degree of impact from the opportunities and classified them as "large," "medium," or "small" (*1).
Among the identified risks and opportunities, those with "medium" or larger impact on our business are listed below.
Scope of analysis: Major domestic businesses (women's healthcare, biosimilars (*2), contrast media)
●Risks
| Type of Risk | Description of Risks and Opportunities | Business and Financial Impact (Financial Impact, billion yen) | |
|---|---|---|---|
| 1.5℃ | 4℃ | ||
| Acute | Risk of increased costs and disruption of business activities due to damage to our offices/factories and supply chain caused by the severity or increase in extreme weather events such as heavy rain, floods, and typhoons (e.g., repair costs for offices and factories, delays in procurement and delivery of raw materials, etc.) | Large (Max -106.5) (*3) |
Large (Max -106.5) (*3) |
| Chronic | Rising sea level may cause seawater to flow into freshwater, the source of well water, making it difficult to obtain freshwater | Large | Large |
| Worsening of working conditions due to extremely high temperatures, lower employee productivity and increased rate of absence due to increasing incidence of diseases caused by climate change | Medium | Medium | |
| Increased energy use due to rising temperatures and increased costs of measures for efficient energy use | Medium | Medium | |
| If snow decreases due to climate change, groundwater will decrease, well water will be unavailable, and industrial water (tap water) will be used, which will increase costs, and additional investment and costs will be required to use tap water for production | Medium | Large | |
| Possible difficulty in procuring raw materials due to water shortages caused by drought overseas (China, Europe, etc.) | Large | Large | |
●Opportunities
| Type of Opportunity | Description of Risks and Opportunities | Business and Financial Impact (Financial Impact, billion yen) | |
|---|---|---|---|
| 1.5℃ | 4℃ | ||
| Products & Services | Increased sustainability orientation among healthcare providers and consumers may make it easier to select products from companies with sustainability initiatives | Medium | Medium |
| Market | Creation of new markets due to diseases that are feared to increase because of climate change | Medium | Medium |
| Cost Reduction | (4°C scenario) Change in energy mix leads to lower electricity prices and lower production costs | – | Medium 0.24 |
| (1.5°C scenario) Decreased demand for fossil fuels due to the trend of decarbonization and lower LPG prices will reduce production costs | Medium | – | |
As a result of the impact assessment, measures are being taken to address risks deemed to be particularly important.
| Item | Business Impact | Countermeasure |
|---|---|---|
| Physical Risk | Decrease in sales and asset (inventory) value due to flooding at the plant | The Risk Management Committee has prepared a flood damage response manual and formulated activities such as emergency responses to be implemented in the event of flooding to ensure the safety of employees, prevent the spread of damage, and assess the situation, as well as preparations and drills during normal times |
| Reputation Risk | Loss of customer reputation due to transportation delays and poor quality resulting from extreme weather conditions | Decentralization of logistics bases to ensure stable delivery of products in the event of abnormal weather conditions |
| Physical Risk | Drought risk in China, Europe, and other regions may cause water shortages, making it difficult to manufacture and procure APIs | Increased inventories of key products and some diversifying of raw material suppliers |
| Physical Risk | Rising sea level will cause seawater to flow into freshwater, the source of well water, and less snowfall will reduce groundwater, making groundwater unusable and increasing the cost of using water supply | Monitoring to ensure prompt response to risks as they arise |
Effects / Expected Benefits
We will further discuss more specific measures to address climate-related risks and opportunities. We will also continue to examine risks and opportunities and matters that are not on the list at the moment and disclose the progress of these activities in a timely and appropriate manner. By engaging in these activities and dialogues with our stakeholders through the disclosure, we will strive to reduce climate-related risks and seize business opportunities in response to market changes, and achieve sustainable growth as a company.
Fig. 1 Definition of Scenario Groups
Notes
(*1)
Large: Very large impact on our company
Medium: Has certain level of impact on our company, but limited
Small: Little impact on our company
(*2) Biosimilars are drugs that contain almost the same amount of the same active ingredients as biopharmaceuticals (original biopharmaceuticals) whose patents have expired.
(*3) Maximum impact calculated based on a single disaster at the Toyama Plant.
